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Excellent post, moonover. Like St Germain says, auditors do forward and backward trace checks of the records that exist. It's pretty easy to hide fraud, for the person who knows accounting, and who has sufficient authority within the system (whether that's computer permissions or just approval/signature authority). Best prevention is the complete separation of duties (The person who can create a vendor in the payables system should not also have authority to issue or sign a PO, and THAT person can't be the same person who processes the receipt of the item, or pays the invoice. And so on.)

Creation of accounts and vendors in a system seems to be the biggest risk area. Because when you have a fraudulent vendor in your system, from there on out you can follow all the normal processes so things look like they're well controlled, and the money flows to the bad guy without ever tripping an alarm. We had a guy do that, and I'm telling you, I would have sworn on a bible that there's absolutely NO WAY this guy was embezzling. No flipping way-- he was great guy (or so I thought), really good at his job, worked hard to save the company money, etc. But, guess he saw a weakness in the system and thought why not, it's free money. They caught him because he went to the well one too many times. Submitted a new vendor request to accounting, and for whatever reason the person who enters them in the system thought to check the tax ID number on the W9 form with that employee's personnel records. The Tax ID # matched his wife's SS#. So even in a system with excellent separation of duties, auditing, etc, it took a vague sneaking hunch on the part of one employee to root it out.

And M and others thanks for the information regarding the random sampling process. We do random samples at work about once a month for QC purposes and it should be representative of the whole, but sometimes it just isn't.

In a way this seems like the perfect storm of circumstances that made it easy for a smart girl to have what she really wanted, the nicest horses and the fame. I've known some really wealthy ASB people, they do have nice things and nice horses, I suppose it was just too hard for her to resist. Still terrible.

I appreciate that some auditors have chimed in to explain the complexities of auditing government offices. But however difficult it may be to find discrepancies in city government accounting practices, I fail to understand how Rita could (on average) usurp around 1/4 of the entire budget of the city each year, for 20 years, and not one person turned his/her head while she did this--when it reaches that level, you no longer have a budget discrepancy, you have a crater in your finances. And in a city that small, I don't honestly believe you could create enough phony invoices year after year to account for the missing money.

At this point, the gig is up, and the people in the government (as well as the auditors) should acknowledge that they dropped the ball on this one--big time. If no one accepts that they were negligent, how are they supposed to learn from this experience?

Well, if you read that Chicagomag article the little city had a close to unique and not well put together government and Ms Crundwell was the one and only person taking care of the finances. I know my DH hasn't a clue as to how much money we have and without a doubt some of that is his lackadaisical attitude about the accounts, but I already had thought of a few ways to make money vanish even if he was checking. My problem is that I can't bring myself to spend big bucks on fun stuff for me at the expense of our family and even his credit rating. I'm legally bound to him through marriage, yanno? What happens to him happens to me. For some reason Ms Crundwell just didn't feel that way about the people in the town she'd grown up in and lived in all her life. I guess that's the sociopathic part.

I'm not an accounting nerd like Moonover but I appreciate the sharing of the why's from all of you in that field of work. I also am quite aware of how people can slack about watching their money, it's very easy to do.

Submitted a new vendor request to accounting, and for whatever reason the person who enters them in the system thought to check the tax ID number on the W9 form with that employee's personnel records. The Tax ID # matched his wife's SS#. So even in a system with excellent separation of duties, auditing, etc, it took a vague sneaking hunch on the part of one employee to root it out.

just wondering... why would an employer have an employees wife's social security number on file?

yes, beneficiary info. I think they actually first found the same tax id# on another one of his "vendors", and then dug deeper once they realized it was fishy. I wasn't involved in the whole deal, I just knew the guy well. Thought I did anyway.

"It is fair to say in the last eight to 10 years a multiple amount of tragedies have befallen a person who was a great civic leader -- one of the sweetest, funniest people who ever existed in our city's history," the attorney said. "She suffered from terrible loneliness. She began around 2001 to gamble heavily."

"Although it's not fair of us to say there is no moral culpability, Maureen acknowledges doing something she ought not to have done," he added.

The Chicago article is excellent, and really shows how something could happen, especially in smaller governments, not-for-profits, and small businesses - too much reliance on too few people, with no checks and balances.

To make it even more horse-related, consider horse charities and how easy it would be for similar frauds to occur. Often you have one or maybe two people who handle all financial duties with little or no oversight from parties able to really understand exactly what is going on. Often the BOD are friends of the creator (which makes it much harder to suggest something isn't right or suggest stronger internal controls) and many times no one on the BOD has significant financial reporting experience.

If I had one strong suggestion for these charities it would be to make sure at least one or two BOD members has accounting or auditing experience and agrees to at minimum to regulary oversee the financial recordkeeping.

Also consider that the equine not-for-profits that tout they are audited can still have fraud occur (and a few that are very suspect to me regularly exclaim that "they have had an annual audit, so everything must be on the up-and-up"). An audit says "these particular financial statements appear to be materially correct", it does not say "everything is run perfectly here with no fraud whatsoever!"

You mean the same people who also did Rita's personal accounts as well? Yup, Rita hired them.
.

It was sort of the same company; there is a real mess as to who did what and if lines were crossed that should not have been crossed... the city's lawsuit has been amended, my guess is CliftonLarsonAllen and Janis Card Co executives will also spend some time with Rita once again; If I were the city I would be looking into possible RICO actions.

"According to the amended lawsuit, the firm (CliftonLarsonAllen) determined it was not “independent” in 2005, according to nationally recognized accounting standards, which prevented it from performing the audit by federal statute.

The firm reached out to Janis Card Co., which had only two certified public accountants, little or no experience in performing municipal audits, and lacked the resources to perform the city’s audits.

A partner in the firm told Janis Card Co. that in return for signing the audit for the city, CliftonLarsonAllen would conduct and prepare the audit.

Further, CliftonLarsonAllen told the city it was doing only a compilation, meaning it provided financial statements for the audit, yet referred to their work as an “audit” in several emails to city supervisors that are listed in court documents.

In fiscal years 2010 through 2012, the firm billed the city $33,500, $34,750, and $37,000, respectively, for its work.

When this is made into a movie the viewers will cheer her on everytime she cuts herself a cheque. and buys a luxury item. No different than thge Danny Ocean series..except she got caught...but then she was at it for a very long time.

She had the life others just dream of. She was world famous for her Quarter Horses and maybe she was even voted Customer of the Year at Tiffany's.

She stole and spent the money during her active years..and now..she will spend it in a facility (like Leona Helmsley) at tax payer expence monetary play on words) until she is a senior.

Then, she will qualify for all of those avaiable programs.

I wonder if she is going to be banned from revenues generated "buy her book" and movie rights?

She won THE lottery...lived a wild life and never denied herself anything...and then..like many lotto winners...she blew it all..

Is there really going to be a movie based off this?
That would be interesting to see how the story is told.

I don't understand how someone steals $100, let ALONE $53 MILLION and doesn't feel an ounce of guilt over it. Nor do I understand how one does this once, and gets away with it to the level she did. I wonder what thoughts were running through her mind the first time she did it, and then every time after that.

I wonder if she thinks it was all worth it. She got to live a dream life for a long time before she was caught. She's not as old as another famous swindler, Bernie Madoff, who got to live like a king for most of his life and will spend very little of it in prison. I bet he'd do it all the same if he had the chance to do it all over again.

I wonder if she thinks it was all worth it. She got to live a dream life for a long time before she was caught. She's not as old as another famous swindler, Bernie Madoff, who got to live like a king for most of his life and will spend very little of it in prison. I bet he'd do it all the same if he had the chance to do it all over again.

I always thought it would be worse to have "had" and lose it all than never to "have" at all. I've been very poor before (not that I'm rich now by any account LOL) but would never want to go back to living the way I had to then.

Don't think many of us will ever have to worry about losing her lifestyle.

"I've spent most of my life riding horses. The rest I've just wasted". - Anonymous

It was sort of the same company; there is a real mess as to who did what and if lines were crossed that should not have been crossed... the city's lawsuit has been amended, my guess is CliftonLarsonAllen and Janis Card Co executives will also spend some time with Rita once again; If I were the city I would be looking into possible RICO actions.

Yes, it does get very blurry about who & what.

As an off side, has anybody seen the picture of the lawyer Dixon hired? He looks like a bull dog! I think it's a firm in Chicago.

Sentenced to 19 1/2 Years In Prison

Today, District Judge Philip Reinhard sentenced former City of Dixon, IL Comptroller Rita Crundwell (60) to 19 1/2 years (235 months) in prison for diverting $53 million from city coffers to her own benefit … one of those benefits was buying horses …. 400 of them at the time of her arrest. The government had requested a prison term of over 20 years while Crundwell’s attorney sought some leniency for her cooperation and age by asking for only 13 years prison. Judge Reinhard just could not get over the amount of money involved and the length of time over which the crime was committed.